$600 Billion Squandered in Afghanistan. What Did it Buy? A Corrupt, Failed Nation

April 22, 2014Guy Taylor / The Washington Times

Confidential US assessments, which the State Department tried to hide from the public, show nearly all Afghan Cabinet ministries are woefully ill-prepared to govern. The Kabul government faces gaps in knowledge, a lack of capability and critical safeguards with an infrastructure that is in danger of collapsing if left to its own accord. The risks of corruption and waste associated with trying to develop a government have long been known -- and hidden from taxpayers.

Confidential US Assessments Show Afghanistan Not Ready to Govern on OwnState Department tries to hide risks of corruptionGuy Taylor / The Washington Times

(April 15, 2014) -- Confidential US assessments, which the State Department tried to hide from the public, show nearly all Afghan Cabinet ministries are woefully ill-prepared to govern after the US withdraws its troops, often describing the gaps in knowledge, capability and safeguards as "critical" and describing an infrastructure in danger of collapsing if left to its own accord.

The State Department USAID reports, obtained by The Washington Times, paint a sobering portrait about the impact of the billions of dollars the US has spent on nation-building over the past decade.

Treated as a whole, the reports suggest that the US spending has yet to create a sustainable civilian government in Afghanistan and, in some cases, has been diverted to corrupt politicians or extremists looking to destabilize the country.

USAID officials told The Times on Tuesday that the risks of corruption and waste associated with trying to develop a government in Afghanistan have long been known and that US taxpayers must be patient before they see further returns on their aid investments.

Americans need to appreciate that the Afghan government ministries hardly existed a dozen years ago, said the officials, who argued that the government has progressed dramatically over the years -- giving all the more reason for Washington now to ensure that the gains are not lost and US national security hurt during the years ahead.

Further, USAID spokesman Matt Herrick told The Times that "we strongly reject all claims that we have improperly withheld information."

"USAID takes very seriously its obligation to share information about its operations with Congress, auditors and the public," Mr. Herrick said.

But questions remain about precisely why the secret assessments, which were conducted by USAID officials in 2012 and 2013 and are known in foreign aid circles as "Stage II Risk Assessment Reports," are just coming to light.

USAID concluded outright that six of those ministries simply cannot be trusted to manage aid from US taxpayers without a dangerous risk that the money will fall victim to fraud, waste, abuse or outright theft.

Only in one of the seven cases -- the Afghan Ministry of Finance in March 2013 -- did auditors conclude that the ministry's systems were "adequate to properly manage and account for" money being channeled in from Washington.

But even with that conclusion, USAID auditors identified 26 risks for fraud and waste at the finance ministry. Three of the risks were deemed to be "high" and the rest were rated "critical," including the overarching danger of the Finance Ministry simply "not being able to fulfill its mandate and carry out its operation."

The reports, which also contain specific recommendations for each ministry to root out mismanagement, are being made public against a backdrop of mounting debate in Washington over America's nation-building project in Afghanistan over the past 12 years.

The Times obtained the assessments under a Freedom of Information Act request filed with the Special Inspector General for Afghanistan Reconstruction, the chief US watchdog over the State Department's nation-building efforts.

The State Department provided the documents earlier to private groups and congressional lawmakers, but in redacted, edited and compressed formats, leading to complaints that the department hid essential information about the poor state of Afghanistan's governing ability. The Times' copies were mostly free of edits, laying bare the stark assessments USAID gave about each Afghan ministry.

'Should Not Be Released'
At the center of that debate sits serious questions about the impact -- or lack thereof -- of the more than $100 billion that Congress says has been channeled toward Afghanistan reconstruction.

Although the amount is far less than the $600 billion estimated to have been spent on US military operations in Afghanistan, it represents the core of America's attempt to build a government that would not crumble quickly should President Obama come through on his promise to pull all US forces out of the nation by the end of this year.

USAID alone has channeled $20 billion toward the effort, according to SIGAR officials.

SIGAR and USAID have fought bitterly in public in recent weeks over whether the US exerted enough safeguards over its spending and whether the State Department has tried to hide the blemishes inside each Afghan ministry.

The Stage II Risk Assessment Reports, along with a series of other Afghan ministry audits that USAID contracted out to the high-level Washington accounting firms KPMG and Ernst & Young, have sat at the center of the dispute.

SIGAR used the assessments as the basis for its scathing report in January highlighting rampant claims of fraud and abuse across the ministries. But what came next was even more eye-opening: The watchdog group wrote a letter to USAID accusing the agency of seeking at "virtually every turn" to block the information from becoming public.

"When SIGAR first requested copies of the ministry assessments at issue here, USAID stamped them 'Sensitive But Unclassified' (SBU), with a legend on the front covers stating that they should not be released 'outside the Executive Branch,' i.e., should not be released to Congress or the public," SIGAR General Counsel John G. Arlington wrote in a March 26 letter to USAID's legal branch.

The letter triggered speculation inside government circles in Washington that USAID might be guarding the material because of a reference that the ministry assessments had made to terrorism.

A version of the assessment, which was conducted by KPMG, appeared this month on the website of the Project on Government Oversight and highlighted how the Afghan Ministry of Rural Rehabilitation and Development had never developed a mechanism "for screening of beneficiaries for their possible links with terrorist organizations before signing contracts or providing funds to the suppliers."

Lack of Accountability
That particular assessment, along with others that USAID contracted KPMG and Ernst & Young to conduct, were not included in the FOIA response that SIGAR provided Tuesday to The Times.

In the response, SIGAR provided The Times with more than 100 pages of the assessments that USAID officials conducted to gauge the capabilities of Afghan ministries.

The documents paint a sobering picture. In one, USAID auditors assessed a shocking lack of management over the financial dealings at the ministry overseeing all mining activities in Afghanistan.

"There is no financial management and accounting system in place to record transactions for both operational and development budget," states the September 2012 assessment of the Afghan Ministry of Mines.

"There is no evidence of reconciliation of monthly payroll records," auditors wrote. "In fact, staff are receiving bonuses in cash which are not declared on their bank transfer."

What's worse, USAID concluded, is that the "same staff is recording and reconciling transactions."

An examination of Afghanistan's main power and electricity generating utility, Da Afghanistan Breshna Sherkat -- known as DABS -- paints an equally bleak picture. The assessment, dated October 2012, found "significant weaknesses in DABS' financial management and accounting system."

Six of 12 risks that auditors identified for fraud and waste at DABS were assessed as "critical." Six others, including the risk of DABS' management "not being committed to sound organizational structure and competence," were rated as "high."

Documents Prove Oversight
Each of the assessments contains a section outlining the Obama administration's 2010 policy to channel "at least 50 percent" of all US government development aid to Afghanistan directly into the budget of the Afghan government.

Under the policy, USAID officials wrote, the agency is committed to evaluating the government capability of whatever nation is receiving aid -- in this case Afghanistan. The point, the officials wrote, is to "understand the fiduciary risk environment in targeted countries" in order to decide whether a given nation's agencies can be trusted with US taxpayer money.

"If the assessment reveals clear evidence of vulnerabilities to corruption, and the partner country government fails to respond, the use of partner country systems must not be authorized," USAID officials wrote.

Although the assessments go on to highlight such vulnerabilities across the Afghan ministries, USAID agreed as of August to channel roughly $695 million in "direct assistance" to those ministries.

USAID officials defended their actions Tuesday by pointing out that the agency has disbursed only about $200 million, specifically because of concerns about widespread fraud and corruption.

Mr. Herrick said suggestions that USAID has tried to hide the risk of such problems only "distract from the larger story that is often overlooked here -- that USAID is protecting US taxpayer money while providing critical development assistance and putting in place strict safeguards and oversight measures."

Another USAID official told The Times that Congress and US government auditors have access to USAID documents in unredacted form either in their offices or at USAID.

The official, who spoke on the condition of anonymity, asserted that it "is a common practice to redact information from the general public about vulnerabilities and other information that could be exploited by unscrupulous actors if exposed."

Other officials said the USAID goes to lengths to work with Afghan officials in an attempt to help them develop the capability to effectively manage their ministries on their own, rather than simply throw money at the situation. As a result, one official said, the process takes significant time and care.

Ghost Employees
Officials writing the documents pulled few punches. The one conducted on the Ministry of Mines, for instance, described a landscape ripe for corruption. Operational problems, USAID auditors wrote, have created a "critical" risk of "kickbacks and bribery."

Similarly strong language was used in a "Conclusion & Results" section of an October 2012 assessment of the Ministry of Agriculture, Irrigation and Livestock, commonly referred to as "MAIL."

"MAIL's financial management/accounting system is not adequate to properly manage and account for donors' funds," auditors wrote. "MAIL does not have the financial management capacity to manage proposed activities."

USAID auditors also pointed to damaging personnel problems within the Ministry of Public Health, whose "payroll database is vulnerable to unauthorized access and modification."

The ministry "runs the risk of paying ghost employees and making improper payments to employees," the assessment states.

A "lack of transparency" within the ministry's procurement and purchasing system "creates an opportune environment for fraud, waste and abuse," USAID auditors wrote, adding that ministry was in violation of existing Afghan government procurement laws, operating with "no effective control over public expenditures."

Thirteen of 14 risks USAID identified in the assessment were rated as "critical," including the risks that the ministry's officials are diverting "government resources for unintended purposes" and manipulating accounting information to "hide illegal actions."

While a January 2013 assessment of the Ministry of Education painted a relatively optimistic view of the ministry's future, auditors cited a "high" risk of government resources being diverted to "unintended purposes."

USAID auditors also found a host of accountability issues associated with the manner in which not just money -- but actual cash -- flows through the Ministry of Communications and Information Technology to the ministry's employees.

"The Ministry permits salary advances in the form of cash to staff, however, there are no internal controls to monitor and track the cash advances and [a] separate ledger to record the cash advances is not maintained," auditors wrote in a January 2013 assessment.